SEC orders crypto-currency firm to pay $35 million to aggrieved investors

The Securities and Exchange Commission (SEC) has ordered crypto-currency company Sparkster and its CEO to pay $35 million into a fund to be distributed to aggrieved investors. The securities regulator also accused crypto influencer Ian Balina of promoting crypto-currency tokens without disclosing the compensation received.

SEC’s cease-and-desist order against unregistered crypto-currency company

The Securities and Exchange Commission (SEC) announced Monday that it has issued a cease and desist order against Sparkster Ltd. and its CEO, Sajjad Daya, “for the unregistered offer and sale of crypto-assets from April 2018 through July 2018.“

The SEC explains that “By offering and selling crypto asset securities called SPRK tokens” in order to raise funds to develop Sparkster’s software platform :

Sparkster and Daya have raised $30 million from 4,000 investors in the United States and abroad.

They told investors that SPRK tokens would increase in value, promising to make the tokens available on a crypto-currency trading platform.

As part of a settlement with the SEC, Sparkster agreed to destroy its remaining crypto-currency tokens, request the removal of its tokens from trading platforms, and publish the SEC’s order on its website and social media channels. Daya has agreed to refrain from participating in crypto asset offerings for five years.

The SEC detailed:

Sparkster and Daya agreed to collectively settle and pay over $35 million into a fund for distribution to aggrieved investors.

Crypto influencer Ian Balina charged by the SEC

The securities regulator also announced Monday that it had “charged crypto influencer Ian Balina for failing to disclose the compensation he received from Sparkster for publicly promoting his tokens and for failing to file a registration statement with the SEC for the Sparkster tokens he resold.“

The SEC explained that Balina purchased $5 million worth of SPRK crypto tokens and promoted them on Youtube, Telegram and other social networks between approximately May and July 2018. The regulator elaborated:

Balina allegedly failed to disclose that Sparkster had agreed to provide him with a 30% bonus on the tokens he purchased in return for his promotional efforts.

The crypto influencer also allegedly organized an investment pool of at least 50 people to whom he offered and sold the unregistered tokens, the securities regulator noted.

Balina is accused of violating the offering registration provisions of the securities law, the SEC detailed, adding that it “is seeking injunctive relief, disgorgement plus prejudgment interest, and civil penalties.“

In response to the SEC’s announcement, Balina tweeted, “Excited to make this fight public. This frivolous SEC charge sets a bad precedent for the entire crypto industry. If investing in a private sale with a discount is a crime, the entire crypto VC space is in trouble. The settlement was denied, so they have to prove themselves.“